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work one of the most valuable of modern times, yet full of inconsistencies. Nevertheless, Mill will always be regarded as the culmination of the school usually known as the English deductive or classical school. Most of the work of the school was deductive; that is, they reasoned by singling out a few main facts of the external physical world and human nature familiar to all, and showing how men must act under the guidance of these laws. None of these economists pretended that the few laws which they considered were the whole of human nature, though they have sometimes been interpreted as if they did so; but they thought that the great multitude of motives which influenced men were too complex to be analyzed, and only one or two (chiefly self-interest) could "be reduced to any assignable law." It is plain that such a system of economics was highly ideal and never realized in actual life. The exceptions to its rules seemed more numerous than the cases to which the rules applied. Men could not long be content with an economics which told them one thing, while life constantly told them something different, and often very different. The result was a reaction toward a fuller recognition of the real facts of life.

Socialism. - Mill's change of heart resulted partly from his study of the socialist writers, who voiced the earliest and most thoroughgoing protest against the views of the classical economists. Modern socialistic doctrine may conveniently be dated from William Godwin's Inquiry concerning Political Justice, the first edition of which appeared in 1793. Godwin and the early French idealists and communists - Cabet, Saint-Simon, Fourier, etc., — began the attack on the ethical and political views of the orthodox political economy. Later the attack was continued in a somewhat more practical and realistic way by writers such as William Thompson and Robert Owen in England, Bazard and Louis Blanc in France, Rodbertus, Lasalle, and Marx in Germany. The foundation of classical political economy was laissez-faire, and its doctrinal structure was built around the system of private capitalistic enterprise. Socialism in essence was a thorough protest against laissez-faire and the private ownership of property. Pierre LeRoux used the word "socialism" in 18381 with the very purpose of expressing the antithesis of individualism.

'It was used before this in England by the followers of Robert Owen.

In recent times, largely under the influence of Karl Marx, socialism has acquired a distinctive economic theory of its own. Marx, in his work on Capital, is apparently as abstract, deductive, and pessimistic as any of the classical school, but at bottom his whole theory was directed against those fundamental institutions of our social order which the classical economists took for granted. Marx has been credited by some as the discoverer of the materialistic or economic interpretation of history, and the whole tendency of the modern scientific socialists has been to emphasize the evolutionary standpoint. The Sociologists. Among other influences which broadened Mill's conception of economic science, and induced him to temper the rigor of his early teachings, were the works of Auguste Comte (1798-1857), the founder of modern sociology. Comte was especially severe in his criticism of the methods of the classical economists. He denied, in particular, that it is possible to develop a helpful science of economics distinct from history, ethics, and politics. Not only must these fields, he maintained, be cultivated in common, but the work must be done by inductive, as distinct from deductive, methods. To the classical assumption that a universal science of economics could be formulated, true for all times and places, he opposed the theory that there is in society an ordered change or evolution, and that the capitalistic stage, to which the classical economics conformed, must be studied in connection with the past and the future. Economics, he particularly insisted, cannot be divorced from history.

The Historical School. This particular line of thought was taken up in Germany about 1850 by three young Germans, Roscher, Knies, and Hildebrand, who vigorously assailed the doctrines of the classical school. They went back to the old premises - self-interest, private property, demand, and supply - and traced out the historical development of economic life, coming to the conclusion that economic policies were not absolutely, but only relatively, true. They denied that economic science can discover laws which hold true for all times and all places. They emphasized the importance of the inductive method, of minute investigations into facts, and the study of legal institutions, custom, and

ethics in their relation to economic life, while most members of the school entertained a strong sympathy for state policies of reform. Among the later writers of this group we may mention especially Gustav Schmoller.

Owing to the political ferment in Germany during the infancy of the historical school and the formation of the German Empire when this reaction against the classical economists was at its height, German political economy of the last half of the nineteenth century was impregnated with a striking nationalistic spirit which separated it even further from the cosmopolitanism of the English writers. The creation of a new state is almost invariably attended by the enactment of restrictive legislation, looking to the amalgamation of the diverse elements incorporated into the new state and the protection of its industries from foreign competition. Laissez-faire, under these conditions, is particularly difficult to maintain. The new national economy of Germany seemed to voice these political necessities. Like the classical economy of England, it was a creature of its own time and its own environment.

The Economic Optimists. The classical English economists have often been called pessimists. This is too strong a term, inasmuch as they all saw hope for improvement. What can be said is that they developed pessimistic tendencies. Take it as we will, the Malthusian doctrine of population is tinged with pessimism, and so also are the Ricardian ideas of the action of nature as seen in the rent of land and in his scheme of distribution. In opposition to English economists, there was developed elsewhere, about the middle of the nineteenth century, a scheme of thoroughgoing economic optimism, and this was presented in a more unqualified way by Frédéric Bastiat (1801-1850), than by any one else; so much so that economic optimism at once brings to the mind of any economist familiar with the history of economic thought the name of Bastiat. An ardent agitator for free trade and a popular pleader for the existing order against the attacks of socialists and anarchists, he was the author of numerous pamphlets, and at the time of his death was engaged on a systematic treatise entitled Economic Harmonies (Harmonies Économique), of which the first volume only was completed. According to Bastiat, there is no such thing

as economic rent. Consequently, the landowner is not the recipient of an unearned income. What we call rent is simply a return for past investments of capital. The profits on capital also, according to him, are simply a return on past labor, and relatively to wages, a diminishing return. For it is a peculiarity of labor stored up in those products which we call capital, that it continually diminishes in value as compared with present labor. In other words, wages are continually gaining relatively as compared with the profits of capital. Capital may gain absolutely on account of the increase in the amount of capital. Wages gain both absolutely and relatively. Value gives us the ratio of exchange between services. Economic gain is in proportion to economic service only that labor is progressively a gainer on account of the fact that man's present services (as seen in labor) increase in value as compared with man's past services as accumulated in capital. To give a concrete illustration, the handle of an ax would be capital — the result of stored-up past labor. It is likely to diminish in value continually when expressed in terms of present labor services, because men are continually learning how to make better and better ax handles.

As Bastiat denied the existence of pure economic rent in the Ricardian sense, he also denied the Malthusian theory of population, holding that no proof could be adduced of a tendency of population to press upon the means of subsistence. The evils that we experience come, according to Bastiat, from man's interference with natural harmonies. Nature works things out well, and this is the best of possible worlds if we would only let nature have her way.

Henry C. Carey, the American contemporary of Bastiat, held similar doctrines, and was apparently the more original man. If either one borrowed from the other, it must have been Bastiat. Probably neither one was guilty of any conscious plagiarism. Carey, however, was not so good a representative of economic optimism as Bastiat, because Carey believed that a protective tariff was a necessity, and this implied the necessity of social action to establish a system of economic harmonies. Carey's general views otherwise are treated below.

The writings of the optimists had a considerable influence for a time in Germany, where they were developed and applied with uncompromising logic by men like Prince-Smith, Faucher, and a considerable number of others who were influential in the press and practical affairs rather than in academic life. In the United States these writings have had a great deal of influence upon a number of early writers, among whom we may mention especially the late Arthur Latham Perry, long professor in Williams College, and Edward Atkinson, the well-known statistician and writer of Boston.

Early American Economists.-The reaction against the English economists, it is interesting to note, began earlier in the United States than in England or Germany. In the early part of the nineteenth century, emphatic dissent from the English doctrines was voiced by a group of publicists, among whom may be mentioned Alexander Hamilton, Daniel Raymond, Matthew Carey, Hezekiah Niles, and Frederick List. Hamilton's work and views are well known; Niles and Matthew Carey were pamphleteers of considerable note in the first third of the nineteenth century; and List, who, in the view of some authorities, planted the seeds of the German historical school, unquestionably obtained his distinctive nationalistic views about political economy in the United States, and first formulated them in his Outlines of American Political Economy, published in 1827.1

Daniel Raymond, however, of all the American writers noted, is the least known, and yet the author of the first American treatise on political economy in which a distinctively American system of economic thought is suggested. Raymond's first book, Thoughts on Political Economy, appeared in 1820; a second edition, under the title Elements of Political Economy, appeared in 1823, and the latter was reprinted with slight changes in 1836 and 1840. The essence of Raymond's system is found in his conception of wealth. Wealth, he maintained, is not an aggregate of exchange values but the opportunity to acquire the material comforts of life by

1 List returned to Germany and was there a forceful writer and agitator for German unity, and is identified rather with the history of economic thought of Germany than with that of the United States.

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